What is roth deferral?

A Roth deferral refers to the practice of contributing money to a Roth retirement account in order to defer taxes on that money until retirement. Unlike traditional retirement accounts, which allow for tax-deferred contributions, Roth accounts require contributions to be made with after-tax dollars.

The main advantage of a Roth deferral is that all withdrawals made during retirement are tax-free, as long as certain conditions are met. This can be particularly beneficial for individuals who anticipate being in a higher tax bracket in retirement or who simply want more flexibility in how they can access their retirement funds.

Additionally, Roth accounts do not have required minimum distributions, allowing individuals to leave the money in the account to grow tax-free for as long as they wish. This can be advantageous for those who do not need to access their retirement funds immediately and want to pass on their savings to future generations.

Overall, a Roth deferral can be a valuable strategy for individuals looking to minimize their tax burden in retirement and maximize their retirement savings.